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TMI Blog2012 (11) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case the action of reopening is without jurisdiction and not permissible either in law or on tact. The present proceedings, therefore, are require to he quashed. 2.1.1 This ground was not pressed by the Ld. A.R. and hence, rejected as not pressed. 2.2 Grounds no.2, 3 4 are interconnected which read as under: 2. The learned CIT(A) has erred in law and on facts in confirming the action of the AO in adding ₹ 73,69,973/- under Sec.2(22)(e) of the Act as deemed dividend in the hands of the appellant. In the facts and circumstances of the case provisions of Sec.2(22)(e) of the Act are not at all attracted and therefore no such addition ought to have been made in the hands of the appellant. 3. Alternatively and without prejudice, learned CIT(A) has erred in law and on facts in not appreciating that the said deemed dividend ought to have been restricted to the accumulated profits of the Madhur Shares Stock Pvt. Ltd. 4. Alternatively and without prejudice, learned CIT(A) has erred in law and on facts in nor following and conveniently ignoring the direct and binding decision of Jurisdictional Tribunal in the case of M. B. Stock Holding Pvt. Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, a show-cause notice was issued to the appellant company on 27.12.2004. The AO considered the reply submitted by the appellant and other material available on the record. He noted that (a) MSSL is a company in which the public are not substantially interested, (b) MCFL is a shareholder of 248100 shares ( out of total 600200 shares of the company) of the MSSL i.e. it has a holding of 41.34% in MSSL, meaning thereby it is a substantial shareholder of the MSSL and (c) The account of appellant company in the books of MSSL produced by the appellant clearly shows that on several occasions, advances have been made to the appellant by MSSL. Therefore, the provisions of section 2(22)(e) of the Act are applicable to the facts of the case of the appellant company. The AO also noted that the appellant's argument that it had business transaction with MSSL does not carry any weight because section 2(22)(e) does not provide for any such exception. Further, during the course of assessment proceedings in the case of MSSL, it was mentioned by MSSL that transactions entered into with MCFL are on commercial basis and MSSL is using infrastructure of the appellant. However, the AO of, had g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2000-01) at the point of time when the MSSL had advanced sum of ₹ 73,69,973/- to the appellant company. At the end of A.Y. 1999-2000, MSSL had accumulated profit of ₹ 25,83,250/- and therefore, the accumulated profit as on 28.02.2004 was worked out to ₹ 90,07,705/-. In brief, it was explained that MSSL had extended an advance of ₹ 73,69,973/-to its substantial shareholders MCFL on 28.02.2002, when MSSL was having an accumulated profit of ₹ 90,07,705/-. Therefore, in the light of section 2(22)(e) of the Act, the whole amount of ₹ 73,69,973/- was considered as dividend in the hands of the appellant company and added back the same to the total income. 2.2.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us. 2.2.3 It was submitted by the Ld. A.R. that copy of ledger account of Madhur Shares Stock Ltd., as shown in the books of the assessee, is available on pages 39-45 of the paper book and from the same, it can be seen that it is in the nature of current account and on various dates, there was debit balance of the assessee recoverable fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curities Ltd. Vs DCIT as reported 11 SOT 302 (Bby). Reliance was also placed on the judgement of Hon ble Delhi High court as rendered in the case of CIT Vs Creative Dyeing and Printing P. Ltd. as reported in 318 ITR 476 (del.) and on another decision of the tribunal rendered in the case of DCIT Vs Atul Engineering Udyog as reported in 133 ITD 01 (Agra). 2.2.4 As against this, Ld. D.R. supported the orders of authorities below and he placed reliance on the judgement of Hon ble Bombay High Court rendered in the case of CIT Vs P.K. Badiyani as reported in 76 ITR 369. Regarding the decision of Hon ble Bombay Bench of the Tribunal cited by the Ld. A.R., it was submitted that this tribunal decision is per inquirium because the Hon ble Bombay High Court s decision was not considered in that case. He also placed reliance on the tribunal decision rendered in the case of Mrs. Sujata Venkteshwaran Vs ACIT as reported in 61 ITD 485 (Mad.). 2.2.5 In the rejoinder, it was submitted by the Ld. A.R. that in para 13 of the tribunal decision rendered by Bombay Bench of the tribunal and cited by him, the judgement of Hon ble Bombay High Court was duly noted by the Tribunal and, therefore, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law does not prohibit business transactions between related concerns, and, therefore, payments made in the ordinary Course of business cannot be treated as loans and advances. Therefore, in the facts and Circumstances of the case and in the light of the judicial pronouncements considered above, especially in the light of decision of the Bombay High Court in the case of Nagindas M. Kapadia (supra), we hold that payments made by a company in the course of carrying on of its regular business through a mutual, open and current account to a related party do not come under the purview of section 2(22)(e) of the Act. 2.2.8 Regarding this objection of the Ld. D.R. that this Tribunal decision is per inquirium because it has not considered the judgement of Hon ble Bombay High court rendered in the case of CIT vs PK Badiani (supra), we find that as pointed out by the Ld. A.R., this judgement was very much cited before the tribunal and it was taken note of by the tribunal in para 30 of the tribunal decision. Hence, it cannot be said that this judgment of Hon ble Bombay High Court was not considered by the Tribunal and, therefore, tribunal decision is per inquirium. In fact, the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing this tribunal decision rendered in the case of N H Securities Ltd., we decide this issue in favour of the assessee and therefore, addition is deleted. These grounds of the assessee are allowed. 2.3 Ground No.5, 6 7 are interconnected which read as under: 5. The learned CIT(A) has erred in law and on facts in confirming the action of learned A.G. in applying, the provisions of Sec. 14 A of the Act in disallowing an amount of Rs,7,21,408'-. 6. The Learned CIT( A) has erred in law and on facts in not appreciating that as against the disallowance of ₹ 7,21,408A under Sec. 14A of the Act the total dividend income claimed as exempt under Sec. 10(33) of the Act was only ₹ 4,35 698/-. 7. Alternatively and without prejudice, the appellant has interest free funds far in excess of the total investment and therefore no disallowance of the interest component can be made. Ld. CTT(A) has in this respect not followed and conveniently ignored the direct and binding decision of -Jurisdictional Tribunal in the case of Torrent Financers (73 TTJ 624). 2.3.1 Brief facts of this issue are that it is noted by the A.O. that the assessee has claimed dividend income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the disallowance out of administrative / general expenses is not called for and even if some token disallowance is to be made, the disallowance made by the A.O. is very excessive. 2.3.3 As against this, Ld. D.R. supported the orders of authorities below. 2.3.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgement cited by Ld. A.R. In the light of this judgement of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (supra), as per the facts of the present case which shows that own funds were many times more than the investment made by the assessee, no disallowance u/s 14A is called for out of interest expenditure of the assessee. This part of disallowance is deleted by respectfully following this judgement of Hon ble Bombay High Court. 2.3.5 Regarding the balance disallowance of ₹ 75,431/-, out of administrative/general expenses, in our considered opinion, although very few company s shares were held by the assessee but still some disallowance out of administrative/general expense is justified because decision has to be taken as to whether such inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1 and 8.1.1 of his order and these paras of his order are reproduced below: 8.1 It was noted by the AO that during the year under consideration, the appellant has received unsecured loans of ₹ 9,42,00,000/-- from M/s. Panther Fincap Management Services Ltd. on 15.09.1999 and 02.11.1999. The appellant was asked to establish the identity of the parties, mode of payment and their creditworthiness. With regard to identity, the appellant was asked to furnish the details of registered office, corporate offices, telephone numbers etc. along with details of directors of the above companies and their shareholding pattern. With regard to creditworthiness the details of business activities being carried out, sources of income, copy of return of income of the above parties etc. were also called for. Vide its submission the appellant submitted the copy of contra account alongwith confirmation, PAN etc. However, the confirmations filed by the appellant were quite old. The authenticity of the confirmation could not be established by the appellant as the appellant had failed to submit any other evidence in this regard. Neither any fresh confirmation was filed by the appellant nor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete details were not available. He submitted that now, the assessee is ready to provide all these details. 2.4.5 Ld. D.R. supported the orders of authorities below. 2.4.6 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the assessee has furnished a confirmation along with PAN but the names of authorized signatory on the confirmation was not given and the details of ward /circle where the creditor was assessed, has not been given. There is no mention about any material supplied in support of the creditworthiness of this creditor. Under these facts, we feel that this issue cannot be decided without examining all these documents and in the interest of justice, the assessee deserves one more opportunity to furnish those requirements and hence, we set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. for a fresh decision in the light of various decisions cited by Ld. A.R. before us as noted above. We would like to make it clear that the burden is on the assessee to bring necessary details and evidences on record such as name of authorized sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now, we take up the penalty appeal of the revenue in I.T.A.No. 27/Ahd/2008. The grounds raised by the revenue are as under: 1. The Ld. CIT(A) erred in law and on the facts of the case in deleting the penalty of ₹ 3,91,04,440/- levied u/s 271 (1 )(c) of the Act. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be cancelled and that of the Assessing Officer may be restored to the above effect. 3.1 Ld. D.R. supported the penalty order whereas, the Ld. A.R. supported the order of Ld. CIT(A). He also submitted that if in the quantum appeal of the assessee, various additions made by the A.O. are deleted then the penalty cannot survive in any case. 3.2 We have considered the rival submissions. We find that while deciding the quantum appeal of the assessee for this very year, we have deleted almost all the disallowances. The disallowance confirmed by us is of ₹ 50,431/- u/s 14A out of administrative/ general expenses and of ₹ 2,36,225/- u/s 40(a)(ia) of the Income tax Act, 1961 in respect of interest tax which was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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